Arena expert: Seattle already has 'sports saturation'

By NICK EATON, SEATTLEPI.COM STAFF

Published 8:38 pm, Thursday, July 12, 2012

Chris Hansen, the arena investor who wants to bring the NBA and NHL to town, says Seattle is one of the best -- if not the best -- cities in the country in which to start up two more teams. The population is more affluent than the average, there are lots of NBA fans and Seattle is the 12th-biggest U.S. television market.

But an expert panelist for the King County Council says Seattle is actually the third-worst city in the country for adding two more teams.

"Right now, given the teams that we have -- we have four right now, including the WNBA -- we rank No. 8 in terms of what I call sports saturation," local economist Dick Conway told a council committee Thursday. "If we add two more teams, then we become the third worst-saturated city with regard to professional sports.

"You don't come up with Seattle being the best place to put teams. That ends up being arithmetically impossible."

As a member of the County Council's arena review panel, Conway conducted what he called an "admittedly crude" analysis comparing Seattle to other U.S. cities with professional sports teams.

Using the Seahawks, Mariners, Sounders and Storm, he took the potential total yearly attendance of these four teams and found that each of the region's 3.5 million residents would have to attend 1.7 games per year to fill 5.9 million seats.

By adding NBA and NHL teams, Seattle's potential sports attendance would jump to 7.4 million a year. Residents would each need to go to 2.1 games a year to fill the seats. That would make Seattle the nation's third-most saturated sports market behind Denver (currently at 2.6 games per year) and Cleveland (2.4 games), Conway found.

Meanwhile, the New York City area has 11 pro teams, but its huge population of 19 million gives it a sports-saturation factor of 0.7 games, ranking it just 21st in the nation. And Los Angeles scored 1.0 for a rank of 17th, Conway said.

"Based on this test, Seattle does not compare favorably with New York or Los Angeles as a place for a new professional sports team," said Conway, who is on the UW's geography faculty and founded Dick Conway & Associates.

"This does not necessarily mean," he added, "that Seattle cannot handle two more teams. But it does suggest that the marketing of the basketball and hockey teams might be more difficult than currently presumed."

UW geography professor emeritus Bill Beyers conducted a separate analysis that came to a similar conclusion. But he added that two extra teams would likely divert some attendance away from Seattle's current sports teams.

Asking whether Seattle can support two additional teams, Beyers said, is a difficult question.

"We know from the past," Conway said, "that we can support the Sonics under pretty much the same situation." But adding hockey and a new arena complicates the matter.

Conway said further study, such as a survey of potential basketball and hockey attendees, may be warrented.

But it should be noted that, these days, attendance is no longer the largest factor in a sport's team's financial success. The majority of a team's revenue comes from broadcast contracts and sponsorship deals -- though the more attendance, of course, the better.

Arena traffic in Sodo

The arena panel's presentation to the King County Council's Budget and Fiscal Management Committee on Thursday also included an analysis of the proposed arena's potential effect on traffic -- both in Sodo and across the metro area.

That's been a point of contention for the Port of Seattle and other organizations that represent the shipping industry. They have warned that increased weeknight traffic in Sodo would hamper shipping operations and could be a "job killer" if the port lost business.

"The fact that sports traffic affects Sodo is reflected in the data," said Doug MacDonald, former Washington state secretary of transportation, who did his own analysis of potential arena traffic.

Weeknight events at a new arena would add about 6,000 cars to the road, mostly on Interstates 5 and 90, he said, which already carry 17,000 to 18,000 cars during rush hour. But because Hansen expects most arena traffic to occur between 6 p.m. and 7 p.m., Seattle's rush hour would effectively be extended about another hour, MacDonald said.

That would happen between 71 and 101 times per year -- depending on whether the NBA, NHL or WNBA teams made their respective playoffs. If you add that to the number of weekday Mariners, Sounders and Seahawks games that already occur, there would be 136 to 180 weeknight events in Sodo per year. Other arena events, such as concerts, would push that number higher.

Considering all six Seattle teams, there would be six weeknights a year on which multiple sports events would occur, MacDonald said. During a banner year, if all six teams made it to the playoffs, there would be 22 weeknights with multiple games.

The county councilmembers -- and the Seattle city councilmembers, for that matter -- will have to ask themselves, "Is this what we want as a transportation scenario out of this opportunity?" MacDonald said.

He said the effects of extra congestion on port operations will need to be studied further. The port should clarify, he said, how shipping traffic might be affected if most cargo loading and unloading stops at 4:30 p.m. Hansen has said arena traffic wouldn't be an issue for the port because most games wouldn't start until 7 p.m.

Meanwhile, Conway said, Seattle's shipping industry is facing steeper competition from other ports and could be under threat by the widening of the Panama Canal. While transportation issues in Sodo should not be ignored, the Port of Seattle has even bigger things to worry about if it really wants to nearly double its cargo traffic in the next 25 years, as is the plan.

"If I were at the Port of Seattle," Conway said, "I would think the arena would be the least of what we are worried about."

Finances and a new arena

Hansen had been working behind the scenes with Seattle Mayor Mike McGinn's office for nearly a year on a plan that could bring the NBA back to town -- and potentially the NHL. Once the conversation went public in February, it only took a few months for the city and county to announce a "memorandum of understanding" that spells out a proposed structure for the government's involvement with building a $490 million arena.

Under the agreement, the city and county would contribute $200 million total, obtained via bonds, to the arena project if Hansen can nail down both an NBA and NHL team. The city's share is $120 million; the county's is $80 million.

Of that total, $100 million is set aside to purchase the land -- which Hansen already owns and has estimated is worth around $50 million -- at the land's appraised value, whatever that ends up being. The remainder of that $200 million would go to purchasing the arena building once it's built, about two years later.

That's one scenario. If only an NBA team is involved, the city would contribute $115 million and the county would front just $5 million. The arena would still be built, with the extra cost being made up by Hansen's investment group. And the arena would still be capable of hosting professional hockey if Seattle eventually got an NHL team.

This makes for two 30-year public bonds: One for buying the land and one for buying the arena about two years later.

Over those 32 years, the bonds would be paid back by taxes on arena operations -- mainly through admissions and B&O taxes -- and by $2 million in annual rent from Hansen's group. If the taxes and base rent don't add up to the city and county's required annual bond payment, Hansen has pledged to make up the difference by paying extra rent.

Any annual surpluses would go to a public reserve fund for improvements to the arena, and eventually -- potentially -- into the general fund, where the city and county's revenue could be used for civic projects.

Justin Marlowe, a public fiscal management specialist at UW's Evans School of Public Affairs, did his own analysis as part of the King County Council's arena review panel and concluded that the proposed financing deal is fair for all parties and adequately protects public funds.

"As far as the risk allocation," Marlowe said Thursday, "this is one of the best allocations we've seen. ... The risks are appropriately shared."

"It is very unlikely," he added, "that you would see, at least in my opinion, any adverse effects on King County's general budget as a result of this proposal."

Marlowe also noted that Hansen's group would have a much more sustainable business plan if public financing were involved. In the wake of the recent economic downturn, it is difficult for private companies to get 30-year or even 20-year financing plans.

But Beyers said it is still unknown how a new sports arena with two new teams would affect the economy of the entire region. Much of the money generated would go to a handful of high-paid professional athletes, to Hansen's ownership group and to the city of Seattle.

The county should do a more in-depth study of the proposal's economic effects on the entire region, he said.

"Clearly, this project is a winner for the City of Seattle tax revenue stream, as the admission tax would be a large gain to city revenues," Beyers wrote in his presentation to the County Council. "However, I argue that the relevant geography for evaluating the fiscal impracts of this proposal is NOT the City of Seattle, but rather the larger regional economy."

The city and county councils are scheduled to hold a public hearing on the arena proposal at 5:30 p.m. on July 19 at Seattle City Hall.